ACIC Opposes Plan to Overcharge Policyholders

July 21, 2004

The Association of California Insurance Companies (ACIC) is opposed to a Department of Insurance (DOI) proposal that would overcharge policyholders with excessive fees.

“The department may exceed its authority under existing law by proposing a plan that would, in some cases, force vehicle owners to pay a special annual fee more than once a year,” said ACIC President Sam Sorich.

The fee plan is contained in proposed DOI regulations that will be the subject of a public hearing in Sacramento on July 26.

Under state law, the department imposes $1.80 in annual fees on insured vehicles to fund anti-fraud programs and the department’s consumer services operation. Insurers now pay a quarter of the fee every three months so no one is assessed more than $1.80 annually.

Sorich said that under the proposed regulations, hundreds of thousands of insured vehicles – both private passenger and commercial – would be subject to the full fee more than once a year, because insurance policies often have a duration of less than one year.

“We believe this is patently unfair,” said Sorich, noting that a large number of vehicles are not insured by the same insurer throughout the calendar year.

“Many consumers do not want to purchase coverage on their vehicles for an entire year. Financial difficulties may cause a consumer to let his or her policy lapse. When finances improve, the consumer acquires a new policy. In such cases, the full fee would be required each time a new policy is purchased,” Sorich said.

“Other drivers terminate their policies when their vehicles are not operated for a period of time and then ask for new policies when the vehicles are put back into use. This situation often occurs with members of the military who are deployed overseas.

“Still other policyholders have a very fluid number of vehicles. Car dealerships are a good example. Under the DOI proposal, the insurers would be called upon to pay the fee again and again for the same vehicle. Or, in some instances, the full fee would be required even though a vehicle is insured for just a few days,” Sorich said.

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